Nintendo Profit Outlook Weakens Ahead of Wii U Launch

Reuters

Published 10:44 AM ET Fri, 9 Nov 2012
CNBC.com

Nintendo trimmed its annual profit outlook Wednesday by almost one-half as a strong yen and diminished console sales weighed on earnings while it readies the launch of the successor to the hit Wii console, which it hopes will reboot earnings growth.

Source: Nintendo.com

For the year to March 31, the creator of Super Mario lowered its operating profit forecast to 20 billion yen ($251 million)from a 35 billion yen forecast in July. That compares with a consensus estimate by 21 analysts surveyed by Thomson Reuters I/B/E/S of a 27 billion yen profit.

Its operating loss for the three months to Sept. 30 edged down to 18.8 billion yen from a loss of 19.6 billion yen a year ago, and compared with an average loss forecast of 16 billion yen from four analysts.

Nintendo's Wii U, the successor to its 100 million-selling Wii machine, is slated to go on sale in the United States on Nov. 18. The first hardware offering from Nintendo in six years boasts a tablet-like touch screen controller and a social network, and lets users record TV shows through TiVo and other digital recording services.

Yet, growing competition from tablet PCs and smartphones that are increasingly eating into the $78 billion gaming market mean the Japanese company, which began making playing cards more than a century ago, may struggle to repeat the hit it had with the Wii.

Its success or failure will also provide a clue to rivals Sony and Microsoft as to whether advanced games machines can hold back the challenge from mobile devices.

Nintendo said on Wednesday that it expects to sell 5.5 million Wii U machines by March 31, the first time it has released a sales target for the device.

The company lowered its full-year forecast for sales of its handheld 3DS by a million, to 17.5 million. Weak demand for the new 3DS, launched in February last year, forced Nintendo to slash the price of the new gadget by about one-third a year ago.

The company stuck with its forecast to sell 2.5 million DS handhelds for the 12 months.

Nintendo also revised its forecast for the euro-yen currency rate to 100 yen from 105 yen for the business year. It kept its forecast for a dollar-yen rate of 80 yen.

Since the start of the business year, Nintendo's shares have fallen 17 percent, compared with an 11 percent drop in Japan's benchmark Nikkei average . Its shares fell 1.7 percent to 10,290 yen on Wednesday before the company released its results for the quarter. The Nikkei fell 0.7 percent.